Page 121 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

improve the productivity of those who remained. Takeda de-
layered its sales organization and moved from having the low-
est sales productivity in its industry to the highest. It also insti-
tuted a merit-based salary structure starting in 2003, with
compensation closely tied to performance at all levels of the
organization. Takeda’s board members were not immune from
these changes. Over a decade, the size of the board was reduced
by 65 percent, and board members were subjected to the same
merit-based compensation policy as everyone else in the company.
Takeda’s achievement in reducing its cost base is evident in
the steady improvement in its margins throughout the decade.
Despite a stagnant market, Takeda’s margins improved from 12
percent in 1992 to 20 percent in 2003. And between 1991 and
2003, the company’s earnings grew 164 percent more than the
average for the Japanese pharmaceutical industry.
Takeda’s success and the uniqueness of its actions are espe-
cially apparent when compared with its closest competitors.
Most of Takeda’s rivals took markedly different paths in the
Lost Decade.
Some of the Japanese pharmaceutical companies suffered
from bloated R&D organizations, a reliance on seeking new
blockbuster drugs, and leadership structures that did not
actively try to bring down costs. Companies unable to repeat
their blockbuster successes tended to get stuck with a high cost
base, and this resulted in a steady decline in profitability. By
2003, Takeda had become the market leader, with EBIT more
than three times greater than that of its main competitor.
Meanwhile, in Japan’s high-tech sector, revenue growth had
been slow but steady throughout the Lost Decade, minimizing
the imperative for companies to reduce their cost base. When
the high-tech-sector downturn hit in 2001, industry revenue

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